Direct Tax Collections Rise 16% to Rs 16.9 Lakh Crore in FY25

India’s net direct collections of taxes went up by 16 percent and amounted to 16.9 trillion rupees, as of January 12, 2025, for the financial year ending 2025 which is an impressive amount itself. This growth is commendable and is a product of a drastic rise in Personal Income Tax (PIT) collections alongside it, which rose to Rs. 8.74 lakh crore, a 21.6% increase over the previous year’s Rs. 7.2 lakh crore in the same period.

The increase in corporate tax collections, another essential component in direct taxes, was rather subdued at 8.12 percent from Rs. 7.10 lakh crores a year ago period to Rs. 7.7 lakh crores. The number of securities transactions entitled to a security transaction tax on the other hand, increased from Rs. 25415 crores in the previous year to Rs. 44500 crores in this period, a growth of 75%.

Also increased considerably was the amount of refunds given during this time frame which increased by 42.5% to Rs. 3.74 lakh crores.

For the current financial year, the central government has set an ambitious direct tax collection target of Rs. 22 lakh crore, the tax revenues include personal income tax of Rs. 11.2 lakh crore and Rs. 10.2 lakh crore from corporate taxes. It is more than Rs. 19.6 lakh crore collected during the last financial year. Due to an already slowing economy, it will be a challenge for the government to achieve this target.

India’s first advance estimate for FY25 projects real GDP growth at 6.4%, while nominal GDP growth is pegged at 9.7%, slightly below the budgeted projection of 10.5%. The revised nominal GDP growth figure has implications for the fiscal deficit, potentially raising it from the budgeted 4.9% of GDP to 5.0% of GDP. The financial targets will be pressured further by lower than expected tax revenues, which are normally tied to nominal growth in gross domestic product.

Personal income tax collections have now surpassed corporate tax collections, and both have elicited debates and calls for further reduction in the tax burden on individual taxpayers. The government is said to be considering providing tax relief measures in the budget to meet these demands and cushion the middle class financially.

This strong performance in direct tax collections highlights the growing contribution of personal income tax to government revenues. However, the broader economic slowdown and financial constraints remain challenges for achieving the government’s overall tax collection and budgetary targets for FY25.